The output index fell to just 51.4 in October from 56 in September, with only 18 per cent of firms surveyed reporting higher output/ business activity last month. Weakness in travel and tourism activity weighed on the whole economy index.
New order growth was still relatively strong with an index reading of 55, although this was also the slowest rate of expansion in close to five years. Given the relative softness of both output and new order growth, only 3.1 per cent of firms surveyed reported increased employment in October, and the employment index (50.3) was only just above the neutral 50-level last month.
“Activity growth in Dubai slowed sharply in October, with the travel & tourism sector showing an outright contraction in output and employment. However, we expect activity in this sector to recover as we head into the winter high-season,” said Khatija Haque, Head of Mena Research at Emirates NBD.
Survey respondents were less optimistic about prospects over the coming year, with the business expectations index easing to 62.1 in October, from 65.8 in September.
Margins continued to be squeezed last month, with input costs rising at a faster rate than in September, while prices charged declined marginally. Output prices have declined every month since February this year, as firms compete for business and market share.
The output index in the travel and tourism sector declined to 49 last month, signalling a contraction in business activity in the sector. Respondents cited subdued market conditions and dampened demand as contributing to weaker activity in the sector.
“We expect that the relative strength of the US dollar continues to weigh on demand from emerging market countries such as Russia and China. Output prices declined marginally in October, suggesting that firms are reducing prices to attract customers,” said Haque.